Hargreaves Lansdown reckons J Sainsbury’s (LON:SBRY) plan to swoop on Asda will come under scrutiny from the competition watchdog, Citywire reports. The comments came after the companies confirmed plans to merge, with the deal set to create Britain’s biggest grocer, surpassing current market leader Tesco (LON:TSCO).
Investors reacted positively to the merger news, sending Sainsbury’s share price rallying 14.53 percent higher to close at 309.00p. The stock provided support to the benchmark FTSE 100 index which ended the session 0.09 percent higher at 7,509.30 points.
Citywire quoted Hargreaves Lansdown’s analyst Laith Khalaf as commenting yesterday that the stance of the Competition and Markets Authority would be critical for the Sainsbury’s-Asda merger, although the rubber-stamping of Tesco’s takeover of wholesaler Booker ‘may give some cause for confidence’.
“We expect the competition to take a localised approach to their assessment as they did with the Tesco takeover of Booker, so store disposals could still be a feature of the merger. Although Sainsbury’s thinks they will be able to avoid any closures,” the analyst pointed out, adding that if the deal went through, “the prospect of Sainsbury’s, Asda, and Argos working together, with Walmart chipping in too, is a pretty powerful combination”.
Other analysts on deal
Bloomberg meanwhile quoted Jefferies’ James Grzinic as commenting that Sainsbury’s takeover of Asda “would represent a remarkable step-up in UK industry consolidation, if cleared,” and estimating that the deal would be approximately 40 percent accretive to mid-term Sainsbury estimates. The newswire also quoted David McCarthy at HSBC as expecting the proposed combination to be given a full referral to the CMA and for the process to take a year.
“While the standalone investment case remains challenged, the shares are likely to track sideways while the market digests the implications of this potential combination,” the analyst further noted.